THE PUBLIC MANAGEMENT OF LIABILITY RISKS
Simon Halliday, University of Strathclyde and University of New South Wales
Jonathan Ilan, University of Kent
Colin Scott, University College Dublin
This is a pre-copyedited, author-produced PDF of an article accepted for publication in Oxford Journal of Legal Studies following peer review. The definitive publisher-authenticated version is available online: Oxford Journal of Legal Studies, 31(3) 527-550 (doi:10.1093/ojls/gqr009)
ABSTRACT
Contemporary discussions of the relationship between negligence liability and the provision of services by both public and private organisations frequently advert to the emergence of a ‘compensation culture’. Despite empirical evidence that compensation culture claims are somewhat inflated, an anxiety persists that risks of tortious liability may still undermine the implementation of public policy. Concerns about the potential negative effects of liability on public administration frame the problem in various ways: first, there is an anxiety that public authorities may over-react to liability risks by becoming excessively risk averse. Second, there is a fear that compensation claiming will divert financial resources away from service delivery and towards the payment of insurance premiums and compensation awards. Third, there is the fear that insurance companies will, as ‘risk bullies’, curtail public service activities. And, finally, there is the suggestion that risk management, including legal risk management, is becoming the dominant mode of government decision-making to the exclusion of professional judgement. This article addresses these concerns through a set of empirical case studies about the management of liability risks associated with road maintenance services. Although our findings suggest that public authorities respond to liability risks in a variety of ways, we found only limited evidence of the above concerns. In general terms, it was a case of public authorities being risk aware and responsive as opposed to risk averse.
1. INTRODUCTION*
Contemporary discussions of the relationship between the law, and in particular negligence liability, and the provision of services by both public and private organisations frequently advert to the emergence of a ‘compensation culture’. Media distortions of litigation rates and compensation awards contribute to an image of compensation claims spiralling out of control and of the tort law system being abused.[1] Public anxieties about the development of a compensation culture have also been fuelled by reports estimating that its cost to society was around £10B each year for the UK[2] and between IR£0.66 and 1.12B for Ireland.[3] Significantly, however, despite empirical evidence that general compensation culture claims are somewhat inflated,[4] an anxiety persists that risks of tortious liability may still undermine the implementation of public policy.
Concerns about the potential negative effects of liability on public administration are diverse and frame the problem in various ways: first, there is an anxiety that public authorities may over-react to liability risks by becoming excessively risk averse in their management of public services.[5] Second, there is a fear that compensation claiming will undermine public policy by diverting financial resources away from service delivery and towards the payment of insurance premiums and compensation awards.[6] Third, there is the fear that private insurance companies will, as ‘risk bullies’, effectively become private regulators of public authorities and curtail certain public service activities.[7] And, finally, there is the related suggestion that risk management, including legal risk management, is becoming the dominant mode of government decision-making to the exclusion of professional judgement.[8]
One of the difficulties faced by UK and Irish scholars and policy-makers alike is that there is a dearth of empirical evidence about how public authorities manage the liability risks inherent in public service provision.[9] The only major study of the impact of liability on public administration, including the impact of liability in negligence, by Charles Epp, focused mainly on the USA.[10] It concluded that an alliance of reform-minded public sector professional networks and lawyers engaging in rights activism brought about a policy framework of “legalized accountability” in the US, whereby public authorities internalised compliance with legal norms as a routine mentality of good policy and practice. However, the extent to which Epp’s findings are applicable outwith the USA is open to question, not least because other jurisdictions, including Ireland and the UK, have less of a history of tort law being used as a tactic of social activists seeking political change.[11] Indeed, in his comparative look at British policing, Epp found that his model of legalized accountability was less evident.[12] Further, despite the significance of Epp’s work, the scope and design of his study leaves some of the above-noted compensation culture fears unexamined.
It is against this background that this article explores the public management of liability risks in the UK and Ireland. The article addresses the compensation culture fears noted above through a set of case studies which examined empirically how local authorities in Scotland and Ireland managed the liability risks associated with the provision of a public roads maintenance service. In terms of the incidence of compensation claims against local authorities generally, the provision of a roads service is amongst the riskiest of all activities. Roads represent the sector which attracts the highest volume of compensation claims and the highest financial payout to claimants. The Accounts Commission for Scotland, for example, has reported that as many as seven out of ten liability claims made against Scottish local authorities related to road defects.[13]
Our findings suggest that public authorities respond to liability risks in a variety of ways, including measures which seek directly to reduce the likelihood of liability as well as actions calculated to mitigate the consequences of liability when it arises. However, we found only limited evidence of the concerns outlined above. Of course, given our case study approach, we can only account for the behaviour of the local authorities which took part in the research project and only in relation to the delivery of a roads maintenance service. Nonetheless, our findings are valuable for assessing more generally the significance of tort law to public authority behaviour and public service delivery. We are able to use our data, first, to map out ways in which public authorities can manage their liability risks. Second, our findings offer suggestions about some of the conditions that may structure which of these approaches will be stronger in a given context. Third, we are also able to use our data to explore why the above-mentioned fears about the potential negative effects of legal liability had only limited purchase in our case studies. This should equip us to assess better when and how tortious liability may pose an operational risk to the delivery of various public services.
We present our data and develop these arguments in due course. Before doing so, however, we must make some introductory remarks about the research project itself and about the law of tort/delict in Ireland and Scotland as it relates to road maintenance.
2. THE RESEARCH PROJECT
The research project was organized in two parts. The first phase involved the collection of survey data from all local authorities in Scotland and Ireland relating to (1) compensation claiming, compensation payments, and insurance provision; and (2) the delivery of road maintenance services. The second phase of the project involved a qualitative assessment of road maintenance service delivery and organizational responses to liability risks in selected authorities within the two jurisdictions. Three case studies were conducted in Scotland in 2008-9: in ‘Sodor’, ‘Beulah’ and ‘Knockbrex’ Councils, fieldwork in each case being conducted over the period of one month. Observation and interviews were deployed as key research methods, supplemented by documentary analysis. Additional interviews in Scotland were conducted with a wide range of actors concerned with road maintenance and/or liability issues: lawyers employed by or representing local authorities, local authority risk managers, local authority road engineers, private insurance personnel, private insurance claims handlers, representatives of the Society of Chief Officers of Transport in Scotland, the Public Risk Management Association, Audit Scotland and the UK Roads Liaison Group. In Ireland, four shorter case studies were conducted, also during 2008-9: in ‘Bovarra’, ‘Riverton’, ‘Hillgrove’ and ‘Manorvale’ Councils. Additional interviews were conducted with private lawyers representing plaintiffs, other local authority engineers and representatives from the monopoly public authority insurer and the Personal Injuries Assessment Board (‘PIAB’), the government agency which has, since 2004, been charged with assessing and determining damages in negligence claims.
3. ROAD MAINTENANCE LAW IN IRELAND AND SCOTLAND
There are important points of difference between Ireland and Scotland in relation to their liability regimes as they affect road maintenance. In Ireland, local authorities retain a statutory immunity from liability for their operations under roads legislation.[14] Liability is, instead, restricted to harm caused by breaches of the common law duty of care.[15] However, even at common law a strong distinction has been maintained between the misfeasance and nonfeasance of public authorities. Authorities are not legally responsible for nonfeasance. This means that, doctrinally, no liability attaches for the failure to maintain a road. Liability arises only if a repair is carried out negligently. Longstanding arguments about the injustice of the principle of immunity for nonfeasance underpinned its abolition in England and Wales in 1961 .[16] Beyond the justice issues the doctrine incentivizes roads authorities to neglect the maintenance of roads.
In Scots law, a distinction between nonfeasance and misfeasance has not been recognised.[17] The long-established common law position is that local authorities have a duty to maintain roads in a safe and secure condition for the passage of those entitled to use them.[18] Further, like local authorities in England and Wales,[19] Scottish authorities have a statutory obligation to manage and maintain roads.[20] Failure to meet this statutory obligation would give rise to liability. The standard of care required is that authorities must inspect carriageways and footways for safety defects in accordance with the common and accepted practice of local authorities.[21] Where hazards are found, or are otherwise brought to the attention of the authority, it has a duty to carry out the repair to make the road safe again.[22] Litigants in delictual actions commonly refer to a professional code of practice[23] to substantiate their arguments about what is the “common and accepted” practice of local authorities. Although the Scottish courts have generally been reluctant to formally rule on the exact status of the code in relation to standards of care, it is clear that certain aspects of it, particularly relating to inspection frequencies, have been accepted as indicating accepted standards and so acceptable practice,[24] a position similar to the English courts.[25] In other words, the courts have deferred to and incorporated into their jurisprudence the code’s assertions about good road maintenance practice.
The standard of care owed by Scottish local authorities to road users can be broken down into three components. First, local authorities must operate an inspection system to detect safety defects. Well Maintained Highways[26] stipulates that local authorities should adopt a hierarchy of roads within its network and assign carriageways and footways to a category which reflects their priority and use. Frequency of inspections should vary, in the main, according to the category within the network hierarchy:
Insert figure 1 here
Second, local authorities must determine which defects constitute a hazard requiring repair. Unlike the issue of inspection frequency, the code is not prescriptive about the precise parameters of hazardousness. Rather, it recommends a risk assessment approach and the use of local discretion about what constitutes a safety risk. The stipulations of the code on this issue, then, are more at a level of principle than detailed rule, mirroring the approach of the courts.[27] The code sets out the features of a defect which should be considered when making such local individual risk assessments, including the depth, surface area or other degree of deficiency of the defect, and the volume, characteristics and speed of traffic. It then goes on to give three examples of local authority practice in England, Scotland and Northern Ireland, each of which has a safety threshold different from the others. This serves to reinforce the code’s message that risk assessment based on local standards is required.
The third component of the standard of care owed by Scottish local authorities is the issue of how quickly a hazardous defect should be made safe. The code, in keeping with its risk assessment approach, recommends that local authorities rate defects on a 1 – 4 scale in relation to the two dimensions of risk: (1) the probability of the risk eventuating; and (2) the likely impact should this occur. The combination of these two risk measurements produces a suggested risk matrix, as follows:
Insert Figure 2 here
The matrix, as we can see, produces a risk factor associated with individual carriageway or footway defects. In turn, these risk factors correspond to a sliding scale relating to how quickly the defect should be made safe:
Insert Figure 3 here
Category 1 defects (“those that require prompt attention because they represent an immediate or imminent hazard or because there is a risk of short-term structural deterioration”) should, according to the code, be repaired or made safe immediately on inspection. Where this is not possible, they should, at the latest, be repaired or made safe within 24 hours (though the code recognises that some local authorities have adopted a target response time of 2 hours). The code does not stipulate how quickly Category 2 risks (i.e. all other safety defects) should be repaired. Rather, it states
[t]hese defects are not required to be urgently rectified, and those for which repairs are required shall be undertaken within a planned programme of works, with the priority as determined by risk assessment”.[28]
For Scottish authorities, then, the duty of care in relation to road maintenance comprises a mix of rules and principles. Liability attaches where (1) there has been a failure to comply with the rules about inspection frequency; (2) where defects have not been adequately recognised as hazardous; or (3) where safety defects have not been repaired sufficiently quickly.
Just as significant as the differences in legal doctrine between Ireland and Scotland, however, are the perceptions within local authorities in the two jurisdictions concerning legal certainty. Whilst authorities in Ireland are apparently protected by the misfeasance/nonfeasance distinction and a more general recognition by the Irish Courts of public policy reasons for not applying too extensive principles of liability to public authorities,[29] the local authority staff in our Irish case studies acted on the basis that outcomes of litigation were difficult to predict. Whereas some Irish authorities applied the nonfeasance doctrine in refraining from repairing certain sections of road, other authorities paid little attention to it. There was a perception amongst some that judges in the lower courts were as likely to have their judgments shaped by the justice of the particular case as by the strict application of legal doctrine. One local authority risk manager, for example, suggested to us that “the attitude of the legal system is that our public liability insurance is in fact accident insurance” and that the court’s main concern is to ensure that claimants receive payouts for accidents.